ISSUE:

Whether payments to foster parents by the State of Vermont on behalf of a
foster child are public assistance to the child or compensation to the
foster parent which can be considered the foster parent's income in
determining whether the one-half support requirement of Section
202(d)(8)(D)(ii) of the Social Security Act is met.

CIRCUIT:

This ruling applies to determinations or decisions at all administrative
levels (i.e., initial, reconsideration, administrative law judge hearing
and Appeals Council).

DESCRIPTION OF CASE:

Loren E. Damon, having lived with his foster parents, Mr. and Mrs. Damon,
for 15 years, was adopted by them several months after Mrs. Damon became
entitled to retirement benefits. His application for child's insurance
benefits on her earnings record was denied when the administrative law
judge (ALJ) found that the foster child payments to Mr. and Mrs. Damon
from the State of Vermont were public assistance to the child and that
because those payments constituted more than one-half of Loren's support
during the year prior to the date Mrs. Damon became eligible for Social
Security "old age" benefits, the requirements of Section 202(d)(8)(D)(ii)
were not met. The child appealed to the United States District Court for
the District of Vermont which upheld the Secretary's decision. On further
appeal by Loren, the United States Court of Appeals for the Second Circuit
reversed and remanded for a determination of the amount of benefits due
the claimant.

HOLDING:

The Court of Appeals held that in the State of Vermont, foster care
payments to foster parents are not to be treated as support from the State
of Vermont to the child, but as property of the foster parents.

Therefore, for purposes of entitlement to Social Security benefits, these
payments may constitute contributions by the foster parents to support of
a child.

STATEMENT AS TO HOW DAMON DIFFERS FROM SOCIAL SECURITY
POLICY:

Section 202(d)(8)(D)(ii) of the Social Security Act (42 U.S.C.
402(d)(8)(D)(ii) and 20 C.F.R. 404.366(b) require that a child adopted
after the worker's entitlement to Social Security benefits must have lived
with the worker and have received at least one-half support from the
worker for the year immediately before the month the worker became
entitled to Social Security benefits. The Social Security Administration
considers payments to a foster parent on behalf of the foster child to be
payments for the child's support from a public assistance agency. Where,
as in the instant case, payments from public assistance agencies exceed
one-half of the support provided to the child, the entitled adopting
parent does not meet the one-half support requirement.

The Court of Appeals noted that Vermont Statutes define foster care as
"care of a child, for a valuable consideration," and that the Regulations
of the Vermont Department of Social Welfare refer to foster care as
"purchased." The Court concluded that the plain letter of the law required
it to construe the payments to a foster parent as the foster parent's
property and not as public assistance to the adopted child. Under this
construction, the application of the payments by the foster parent to the
foster child's needs constitutes support by the foster parent from the
parent's income and not support by a public assistance agency.

EXPLANATION OF HOW SSA WILL APPLY THE DECISION WITHIN THE CIRCUIT:

This ruling applies only to cases where the child resides in a State in
the Second Circuit (New York, Connecticut, or Vermont) and the State law
treats foster care payments as payments to the foster parent and not
assistance payments to the child at the time of the determination or
decision at any administrative level of review, i.e., initial,
reconsideration, administrative law judge hearing or Appeals Council.

In a claim for child's benefits under Section 202(d)(8)(D)(ii) of the
Social Security Act (42 U.S.C. 402(d)(8)(D)(ii)), where the worker was
receiving payments as a foster parent for a foster child whom the worker
adopted after the worker became entitled to Social Security benefits, the
payments are to be treated as income of the foster parent in determining
whether such parent contributed one-half of the adopted foster child's
support of purposes of Section 202(d)(8)(D)(ii).

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